Mid-year PV review

After several years of hustling and hyperbole in the photovoltaics industry, the first half of 2012 has been a time of oversupply and underachievement globally. pv magazine takes a look at the biggest developments of the year to date. Overhang, crystalline, storage and fracking are just some of the watchwords.

Production capacity for photovoltaic panels is expected to reach 59 GW in 2012, while only 30 GW are expected to sell worldwide.

Conergy AG

Looking at the big picture, while downstream providers have been swamped, the photovoltaic manufacturing segment of the renewable energy sector has been stalled for the past six months, due to worldwide overcapacity, or "overhang"; a tenacious financial crisis that is causing most nations to cut back on domestic funding and subsidies; and support for protectionist programs, including domestic content eligibility requirements and tariffs.

In fact, a new report issued by Boston-based GTM Research places production capacity for photovoltaic panels this year at 59 GW, while only 30 GW are expected to sell worldwide. GTM notes that the glut of supplies already has taken its toll on the industry, sending several U.S., European and Asian companies into bankruptcy when they failed to cut production prices in proportion to the more than 50 percent drop in wholesale panel prices since the beginning of 2011. The plummet in panel prices, which currently stand at about US$0.70 to $0.85 per Watt for most major manufacturers, will continue, with costs likely to reach $0.45 by 2015.

However, there have been some bright spots, including a carbon tax in Australia that became effective on July 1, driving the adoption of renewables; as well as more and larger transfusions of capital at the regional, state and municipal levels, especially in the United States. And some developed nations are welcoming solar development. For example, the market in Japan opened up, effective July 1, as the nation moved to replace its nuclear infrastructure with renewable energy, offering a set a feed-in tariff price of ¥42 ($.53) per kWh for solar over a period of 20 years.

But consistently, as global national debt figures have surged upward during the first half of the year, generous funding and subsidies for new energy technologies have been trimmed down.

The U.S. Congress pulled the plug on Section 1603 (also known as the 1603 Treasury Grant Program) just one day before the New Year, meaning that applicants would remain eligible for the 30 percent grant on commercial solar plants only if they had commenced construction on projects by December 31, 2011, and could complete work by December 31, 2016.

However, further down the food chain, at the state level in the United States, a bill to create FITs for the poor and the disadvantaged passed in the California Assembly, early in June. The "Solar for All" bill, AB 1990, represents the first significant action on FITs in California during this current legislative session. It is also the first time in North America that advocates for the impoverished have made a move for equal opportunity to develop renewable energy through the use of FITs.

Another major solar player among U.S. states, New Jersey, has resurrected its Solar Renewable Energy Contracts (SRECs) by moving obligations forward. Effective June 1, 2013, the market will see an increase in SREC requirements, represented as a percentage-based target, rather than a fixed megawatt-hour (MWh) allotment. Although the percentages will rise through 2017, future allocations will decline. As a consequence, solar deployments should ramp up in the near future and then default to a market-driven level at the end of the decade.

Similarly, Connecticut is implementing a Zero-emissions Renewable Energy Credit (ZREC) scheme, which will award one ZREC for each MW of energy produced, with a maximum payment of $350 and a cap on installations of one MW. Missouri also has a modest SREC program, which pays $50 per MWh through 2012.

And on the municipal level, in Phoenix this May, the largest U.S. city-sponsored solar program was re-launched, thanks to a US$25 million infusion from the National Bank of Arizona. Solar Phoenix 2 allows qualifying homeowners throughout Arizona who are within the APS (Arizona Public Service) and SRP (Salt River Project) service territories, to install a solar system on their homes with no upfront investment. Homeowners simply pay monthly to lease the equipment.

With ever-lower margins , all-out competition for projects, and a rising level of difficulty in obtaining funding, a number of regions have built protectionism into their plans, most recently in the Province of Ontario in Canada, which reviewed and amended its two-year-old FIT scheme as of March. The report recommended that FIT payments be reduced by an average of 20 percent and application processes simplified. In addition, it required that a certain amount of "domestic content" be incorporated into both wind and solar power plants. In the case of solar arrays, 60 percent of the installed materials must be "Made in Ontario", in order to qualify for the province’s FIT scheme.

Ontario is not the only region to date that has included a "domestic content" mandate in its funding prerequisites: At least four countries – China, France, India and Italy – a have adopted some form of content requirements for renewable energy platforms during the past few years. What’s more, in May, two U.S. Senators unveiled their plans to introduce a domestic content requirement, in order to prevent Chinese photovoltaic manufacturers from taking advantage of the country’s 30 percent tax credit.

Both nations have accused Ontario of discriminating against its global trade partners and giving preferential treatment to local providers. The two cases, in all likelihood, will lead to a landmark ruling on the legitimacy of domestic content requirements in international commerce. Third parties to both disputes include Australia, Brazil, China, El Salvador, Honduras, India, Korea, Mexico, Norway, Chinese Taipei, Saudi Arabia and the United States. In addition, each of the main complainants is listed as a third party to the other’s case.

Creating even more notoriety and industry chatter, several complaints against China’s solar manufacturers have been lodged – first in the United States by domestic solar manufacturers and now in the European Union. In both instances, SolarWorld AG has been the instigator, originally on behalf of its subsidiary operations in Eugene, Oregon; and then on behalf of its headquarters group in Bonn, Germany.

The case in the United States, which has been joined by six other manufacturing complainants, would impose tariffs on all Chinese solar imports on the grounds that China has violated fair trade by: (i) providing countervailing duties (CVDs) to its manufacturers; and (ii) dumping products in America at below-market prices. A final determination in the case is due soon. The more recent complaint to the EU Commission is anti-dumping (AD)-related only, and had not been accepted for consideration at this time.

In retaliation, China has threatened to take the complainants to court on similar charges, as well as to do business in and with other countries.

Mono a mono

On the hardware side of the business, this year, crystalline silicon (C-Si) remains the strongest technology. High-end mono c-Si nosi(molicon) offers the greatest efficiency at 22 percent, as produced by U.S. and Japanese solar manufacturers, but it is expensive to make, offering lower margins than multi c-Si (polysilicon), which consistently earns the higher market share of the two.

C-Si supporters are suffering from a double oversupply – too much raw material (silicon), as well as too much finished product. Some suppliers already have filed for bankruptcy. Indeed, pricing on polysilicon imports from the United States is now so low that China-based suppliers, GCL-Poly Energy Holdings and Dago New Energy Corp., reportedly have filed a trade complaint with their Ministry of Commerce, seeking duties on U.S. silicon imports.

The complaint has been contested by China’s solar manufacturers, which will only gain by purchasing the lowest-priced silicon. However, it still represents pushback from the Chinese industry as a whole, which has been anticipated since China began battling protectionist CVD and AD complaints from the United States.

This may be the first time that China’s low labor and production costs have failed to protect its manufacturers from the financial pain the rest of the industry is feeling. Even the anticipated U.S. tariffs will not materially reduce China’s market momentum. About five GW of demand is expected domestically in China during the second half of 2012. This will take the U.S. price pressure off Chinese Si-manufacturers (who also are getting a foot in the door in Japan).

What’s more, tier-one Chinese products now cost more in the United States than in Europe. This indicates that China’s manufacturers may opt to partially relinquish the U.S. market to sell their products in E.U., heating up the price competition there, according to Digitimes, which covers Asian IT. "What’s happening now in the industry is a real bloodbath," Dirk Morbitzer, a market researcher at Renewable Analytics in San Francisco, told William Vorsatz of pv magazine. "There continues to be significant surplus capacity, and this is exerting downward pressure on prices."

And the effects are being felt. Germany-based Q.Cells filed for insolvency last April, a victim of the brutal solar market. In June, Schott Solar AG, also based in Germany, announced that it would cease all crytstalline silicon production, due to the "drastic deterioration" of the photovoltaic market conditions, said to be driven, particularly, by Asian competitors. The company’s thin film and solar thermal operations will continue, however. A host of other photovoltaic companies, predominantly in Germany and the U.S., have been forced to file for insolvency, thus confirming consolidation in the industry.

Thin margins

On the whole, thin film cells have lower efficiency and are less expensive to produce than c-Si. This technology segment had been an up-and-comer in the industry, but not this year. As conventional photovoltaic module prices plunged, thin film companies have found themselves under increasing pressure to raise the efficiency of their products and reduce manufacturing costs to remain competitive.

However, one company seems to have found the "secret sauce". On June 12, Calyxo GmbH revealed that it planned to ramp up the capacity of its CdTe thin film photovoltaic modules in Germany. Located in Bitterfeld/Wolfen-Thalheim, the company, which formerly belonged to Q.Cells before being taken over by Solar Fields last February, said it will increase production from 25 to 80 MWp by the end of this year, via a second production line.

In an official statement, the company opined, "CdTe technology has an enormous potential to reduce the costs of solar power generation. Thin-film solar cells are economic to manufacture and can convert solar energy to electricity under the most unfavorable weather conditions. The modules still operate efficiently on roofs that are not directly aligned to the south."

Despite all the angst, a good number of photovoltaic deals have been signed, developed, or delivered during the first half of 2012, and the installation (or downstream) part of the industry has been consistently busy. Just a sampling of projects that are new or in progress includes the following:

As reported in June, Japan’s Toshiba Corp. is planning to install 100 MW worth of solar domestically in Minami Soma. The electronics giant will invest 30 billion yen ($379.6 million) in the project, which is expected to start construction this year, with completion scheduled for 2014.

The Californian Public Utilities Commission approved five renewable energy contracts worth 1,088 MW in January 2012. Three of the agreements were signed with Southern California Edison and Solar Star California, a subsidiary of SunPower, for the Quinto, AVSP I, and AVSP II photovoltaic projects, worth collectively, 711 MW. The Quinto project is expected to begin delivering power by the end of 2014, with the AVSP I and AVSP II projects doing so in October 2016.

In June, U.S. federal authorities approved the development of a 350 MW solar plant on an Indian reservation outside of Las Vegas. It will be the first commercial solar energy project on tribal land. U.S. Interior Secretary, Ken Salazar announced that he signed on a plan in collaboration with the Moapa Band of Paiute Indians. The solar plant that will potentially power 100,000 homes. "We do not want Indian country to be left behind as we move forward with the new energy front in the United States," Salazar told the press.

And on a national level, the share of sola-generated energy in Germany significantly increased in the first six months of 2012. On a sunny May 26, Germany set a new world record. At midday, approximately 1.1 million photovoltaic installations supplied 22 GW of solar electricity – roughly 40 percent of the total power generated in the nation. Around 14.7 billion kWh of electricity were said to have been produced from 1.2 million photovoltaic systems.

Rising to the challenges

What do photovoltaic industry players identify as the biggest developments and primary challenges?

Sabena Suri, CEO of Golden Gate Solar Tech in San Francisco told pv magazine, "The most important developments have been the tariff impositions on Chinese-made panels and the closure of so many manufacturers, like Abound Solar. There is still oversupply of panels in the market that is bringing down the pricing. Manufacturers are getting into the business of financing solar projects, given the weak economic conditions everywhere. Finally, everyone is looking for emergent markets that also have finance available, such as Saudi Arabia."

"Among the positive things I would list for the first half," Jack Rivkin, a board member of the World Policy Institute and a director at Idealab, commented to pv magazine, "are the developments in energy storage technology, which will help intermittent technologies, such as solar go mainstream, as well as the reductions in nuclear technology, which enhance the need for solar energy." Rivkin added, "On the other hand, I see the technological development of fracking – which will facilitate access to new reserves of hydrocarbon and make it tougher for solar to take hold – as negative for the industry as a whole."

Rosie Pidcock, who chaired the International Student Energy Summit in 2011 (and just finished a semester in China), provided pv magazine with her perspective: "Despite the constant worrying press regarding the manufacturing side of the industry due to China's fierce subsidization to keep costs artificially low, installation still appears to be on the rise around the world. Although manufacturers are undoubtedly suffering from downward pressure on prices, the overall push to make solar more cost competitive with fossil fuels is a reality that the solar industry must accept."